US President Donald Trump moved to fire Federal Reserve Governor Lisa Cook, citing “sufficient cause” following allegations of mortgage occupancy fraud. The first black woman to sit on the Federal Reserve’s board of governors was nominated to the Fed in 2022 by then-president Joe Biden. The term is set to expire in 2038.
In an August 25 letter posted on Truth Social, the president addressing Cook, wrote that he has “sufficient cause to remove you from your position.” Cook was accused of falsely labelling a secondary home as her primary residence on mortgage applications.
Trump’s latest move comes amid frequent attacks on the Fed Chair Jerome Powell for not decreasing interest rates quickly enough. Trump has even threatened to dismiss Powell, who has previously cautioned that the president’s tariffs will raise prices for American consumers.
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The decision to fire Cook may give Trump an opportunity to appoint someone to the Fed board.
What has Trump said against the Fed governor?
Trump claimed in the letter that Cook faked her bank records in order to acquire favourable mortgage terms before joining the Fed. He accused her of “deceitful and criminal conduct in a financial matter” and questioned her “integrity.”
“At a minimum, the conduct at issue exhibits the sort of negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator,” he said, asserting the authority to fire Cook under Article 2 of the US Constitution. Donald Trump threatened to fire Cook if she did not resign.
What did Cook say?
Cook has refused to resign, saying, “I have no intention of being bullied to step down from my position because of some questions raised in a tweet.”
“I do intend to take any questions about my financial history seriously as a member of the Federal Reserve, and so I am gathering the accurate information to answer any legitimate questions and provide the facts,” she added in a statement on August 20.
What happens if Cook sues?
Abbe Lowell, a high-profile defence attorney, is representing Cook in “a lawsuit challenging this illegal action.” Such a step would allow Cook to immediately seek a preliminary injunction, which would prevent her removal while the lawsuit moves forward.
In order to give the Trump administration an opportunity to elaborate on its accusations against Cook, both sides would submit papers detailing their arguments. Cook may be able to use the filings to support her claim that her termination was politically motivated and unjustified.
The decision may depend on Cook’s ability to persuade the judge that if the status quo wasn’t maintained, she and the Fed would experience “irreparable harm” throughout the lawsuit. Since it could take months or more for a judge to rule on the case’s merits, including whether Cook was dismissed “for cause,” or for good reason, a judgment on a preliminary injunction — which could be delivered swiftly — would be essential.
Members of the Fed’s board of governors may be “removed for cause,” according to Section 10 of the Federal Reserve Act, but it doesn’t specify exactly what “cause” means. Laws that employ the term often define it as encompassing three possibilities: inefficiency, neglect of duty or wrongdoing in office. The Supreme Court hasn’t ruled on whether a president has adequate grounds to dismiss a Fed official for cause.
What arguments might Cook make in her defence?
She could argue that unverified accusations are insufficient to justify her removal. She might also argue that the charges are unrelated to her position, as the alleged behaviour occurred a year before Cook’s appointment and had nothing to do with her duties as Fed governor.
In a statement released by her attorney, she also stated that Trump doesn’t have cause to fire her. “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so. I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022,” she added.
